News U Can Use February 15, 2019
2 The Week that was 11 th February to 15 th February
Indian Economy India s retail inflation declined to 2.05% in Jan 2019 from 2.11% in the previous month and 5.07% in the same month of the previous year. This is the lowest reading since Jun 2017. Fuel and light category fell to 2.20% in Jan from 4.54% in Dec 2018. The drop came as food prices continued to decline with the consumer food price index contracting 2.17% in Jan 2019 compared with a contraction of 2.65% in the previous month but an expansion of 4.70% in the same month of the previous year. The Index of Industrial Production (IIP) rose to 2.4% in Dec 2018 as against a growth of 0.3% in the previous month and 7.3% in the same period of the previous year. For the period from Apr to Dec of 2018, IIP grew 4.6% as against an increase of 3.7% in the same period of the previous year. On the sectoral front, the manufacturing sector increased 4.7% in Dec 2018 compared with growth of 2.7% in the same month of the previous year. India s Wholesale Price Index-based inflation (WPI) came in at 2.76% in Jan 2019 as against 3.80% in Dec 2018 as prices of fuel and power came down. Wholesale price inflation was at 3.02% in Jan 2018. Fuel and power inflation increased 1.85% in Jan 2019 compared with a rise of 8.38% in Dec 2018. This happened as LPG fell 7.47% in Jan against a rise of 6.87% in Dec. Petrol too fell 3.35% in Jan from a rise of 1.57% in Dec. Inflation in potato grew at a slower of 26.30% in Jan 2019 against a rise of 48.68% in Dec 2018. The WPI Food Index came in at 1.84% in Jan 2019 against 0.07% in Dec 2018. 3
Indian Equity Market Domestic Equity Market Indices Indices 15-Feb-19 1 Week Return YTD Return S&P BSE Sensex 35,808.95-2.02% -0.72% Nifty 50 10,724.4-2.00% -1.27% S&P BSE Mid-Cap 13,940.54-2.71% -9.70% S&P BSE Small-Cap 13,252.81-2.96% -9.89% Source: MFI Explorer Ratios NSE Advance/Decline Ratio Date Advances Declines Advance/Decline Ratio 11-Feb-19 547 1299 0.42 12-Feb-19 717 1077 0.67 13-Feb-19 685 1116 0.61 14-Feb-19 854 932 0.92 15-Feb-19 642 1158 0.55 Source: NSE S&P BSE Sensex Nifty 50 S&P BSE Mid Cap S&P BSE Small Cap P/E 22.79 26.53 29.88-98.04 P/B 2.97 3.34 2.38 1.96 Dividend Yield 1.19 1.26 1.06 0.98 Source: BSE, NSE Value as on Feb 15, 2019 Indian equity markets closed in the red as investors remained concerned over rising oil prices after Saudi Arabia declared deeper cuts in oil production. Further, the terrorist attack in Kashmir weighed on the market sentiment, thereby muting buying interest. Weak global cues continued to take a toll over the benchmark indices. Weak U.S. retail sales data for Dec 2018 and comments from the U.S. President to declare a national emergency to try to obtain more funds for the U.S.-Mexico border wall kept the markets under pressure. Further, investors remained cautious over the latest round of discussion between U.S. and China. However, slowdown in retail and wholesale inflation for Jan 2019 and strong IIP data for Dec 2018 restricted the losses. 4
Indian Equity Market (contd.) Sectoral Indices Indices Last Returns (in %) Closing* 1-Wk 1-Mth S&P BSE Auto 18,263-3.59% -8.87% S&P BSE Bankex 29,972-1.88% -2.31% S&P BSE CD 21,092-2.60% 0.57% S&P BSE CG 16,411.2-2.59% -8.50% S&P BSE FMCG 11,358.8-1.93% -5.68% S&P BSE HC 13,433-3.93% -5.06% S&P BSE IT 15,378.4-1.57% 6.17% S&P BSE Metal 10,014.3-2.45% -10.52% S&P BSE Oil & Gas 13,073.3-4.22% -1.96% Source: Thomson Reuters Eikon *Value as on Feb 15, 2019 Indian Derivatives Market Review On the BSE sectoral front, indices closed on a weak note. S&P BSE Oil & Gas was the major loser, down 4.22%, followed by S&P BSE Healthcare that fell 3.93%. Oil and Gas stocks remained under pressure over renewed concerns about rising crude oil prices. Healthcare sector plunged as a pharma major fell after a research firm reportedly stated that 11 observations found under Form 483 on one of its manufacturing unit includes four repeat observations. S&P BSE S&P BSE Auto and S&P BSE Consumer Durables fell 3.59% and 2.60%, respectively. Nifty Feb 2019 Futures were at 10,746.55, a premium of 22.15 points, over the spot closing of 10,724.40. The total turnover on NSE s Futures and Options segment for the week stood at Rs. 44.27 lakh crore as against Rs. 42.12 lakh crore for the week to Feb 8. The Put-Call ratio stood at 0.96 compared with the previous week s close of 0.91. The Nifty Put-Call ratio stood at 1.30 against the previous week s close of 1.59. 5
Yield in % Domestic Debt Market Debt Indicators (%) Current Value 1-Wk Ago 1-Mth Ago 6-Mth Ago Call Rate 6.24 6.35 6.42 6.37 91 Day T-Bill 6.37 6.38 6.63 6.75 07.80% 2021, (5 Yr GOI) 6.75 6.85 6.90 7.67 07.17% 2028, (10 Yr GOI) 7.58 7.52 7.47 7.82 Source: Thomson Reuters Eikon Value as on Feb 15, 2019 7.68 7.57 7.47 7.37 Source: CCIL 10 -Yr Benchmark Bond ( % ) 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb Bond yields rose following sharp surge in crude oil prices and concerns over higher than expected borrowing plan set forth by the government. The government plans additional borrowing of Rs. 36,000 crore. However, fall in inflation rate for Jan 2019 restricted the losses. Yields on the 10-year benchmark paper (7.17% GS 2028) rose 6 bps to close at 7.58% from the last week s close at 7.52%, after trading in a range of 7.47% to 7.58%. RBI conducted auction of state development loans of 11 state governments for notified amount of Rs. 15,200 crore, of which Rs. 14,545 crore was accepted. The cut-off yield was in the range of 7.83% to 8.37%. 6
Yield in % Domestic Debt Market (Spread Analysis) Maturity G-Sec Yield (%) Corporate Yield (%) Spread bps 1 Year 6.66 8.23 157 3 Year 6.90 8.38 148 5 Year 7.26 8.53 128 10 Year 7.72 8.69 97 Source: Thomson Reuters Eikon Value as on Feb 15, 2019 Yields on gilt securities increased on 2- year paper and 10 to 30-year maturities by up to 10 bps. Yield fell across the remaining maturities in the range of 2 bps to 11 bps. Corporate bond yields fell across 1 to 4- year maturities in the range of 3 bps to 12 bps and increased across the remaining maturities by up to 3 bps. Difference in spread between AAA corporate bond and gilt expanded on 1- year paper and 4 to 7-year maturities in the range of 3 bps to 12 bps. 8.27 7.47 6.67 5.87 Source: Thomson Reuters Eikon India Yield Curve Shift (%) (W-o-W) 3 Mths 6 Mths 1 Yr 5 Yrs 10 Yrs 20 Yrs 30 Yrs Change in bps 15-Feb-19 08-Feb-19 9 2-4 -11 Change in bps 7
Regulatory Updates in India The minister of state for finance said the number of suspicious refund claims under income tax have increased over the last three years. Refunds disbursed by the income tax department (ITD) has grown over the years. The ITD selected 20,874 cases in the current fiscal to examine suspicious refund claims compared with 11,059 and 9,857 in the previous two fiscals. The income tax refunds disbursed till Feb 2 stood at Rs. 1.43 lakh crore compared with Rs. 1.52 lakh core in FY18 and Rs. 1.63 lakh crore in FY17. According to latest Reserve Bank of India (RBI) data, the pace of growth in bank credit and deposits has moderated on a fortnightly basis. While credit grew 14.5% to Rs. 94.29 trillion, deposits increased 9.63% to Rs. 121.22 trillion for the fortnight ended Feb 1, 2019. In the fortnight ended Jan 18, 2019, deposits had increased 9.69% to Rs. 119.86 trillion and credit grew 14.61% to Rs. 93.32 trillion, RBI data showed. The gap between pace of credit disbursal and deposits mobilisation is growing bigger. The Comptroller and Auditor General (CAG) has said in a report that the income tax department (ITD) caused a loss of Rs. 6,093 crore to the exchequer due to 1,183 mistakes made in assessing the income-tax returns (ITRs) of real estate companies between FY14 and FY17. The CAG scrutinised 22% of the 78,647 assessments made during this period. It said ITD needed to internally audit the remaining assessments to pin down reasons for errors. 8
Regulatory Updates in India (contd..) In order to incentivise effort to bring down recoverable arrears, the indirect tax department has made recovery of arrears a parameter in the annual performance appraisal for tax officials. Recoverable arrears stand at over Rs. 26,000 crore. Against a target of Rs. 10,000 crore for FY19, the tax arrears recovery vertical of the department has managed to achieve just Rs. 3,500 crore in the Apr-Dec period. The government could extend additional subsidised loans of at least Rs. 6,000 crore to sugar mills and others to expand their ethanol production capacity. This is being done to help mills diversify their product basket away from over-dependence on sugar and bolster their ability to clear cane dues to farmers. An expert panel established by the government has recommended setting the minimum wage at Rs. 375 a day. This would be higher than the existing rate of Rs. 321 for agriculture or unskilled workers and Rs. 371 for semi-skilled workers. The committee has devised a new methodology that does away with the variation in wages based on sector, skills and location. It has proposed a balanced diet approach to compute minimum wages. The recommendations, if accepted, will lead to a wage bracket ranging from Rs. 340 for Bihar and Uttar Pradesh to Rs. 447 for Gujarat. 9
Global News/Economy According to a report from the Labor Department, U.S. consumer price index remained unchanged in Jan 2019 as against the revised reading in Dec 2018. Consumer prices remained unchanged for the third month in a row. Steep decline in energy prices was offset by surge in prices for other goods and services. On an annual basis, consumer price growth eased to 1.6% in Jan 2019 as against 1.9% in Dec 2018. This marked the slowest rate of growth since Jun 2017. Preliminary figures from the Office for National Statistics showed U.K. economic growth slowed more than expected in the fourth quarter of 2018. The full-year growth came in at the weakest since 2009. Gross domestic product grew 0.2% from the third quarter, when the economy expanded 0.6%. Annually, GDP increased 1.3% in the fourth quarter, the weakest pace since the second quarter of 2012. According to a report from the Cabinet office, Japan's gross domestic product grew 0.3% (seasonally adjusted) on quarter in the fourth quarter of 2018 as against a fall of 0.6% in third quarter of 2018. GDP grew 1.4% on yearly basis after contracting 2.5% in the third quarter 2018. 10
Global Equity Markets Indices Global Indices 15-Feb-19 1-Week Return YTD Return Dow Jones 25,883.25 3.09% 10.96% Nasdaq 100 7,055.179 2.05% 11.46% FTSE 100 7,236.68 2.34% 7.56% DAX Index 11,299.8 3.60% 7.02% Nikkei Average 20,900.63 2.79% 4.43% Straits Times 3,239.74 1.18% 5.57% Source: Thomson Reuters Eikon Value as on Feb 15, 2019 Europe U.S. U.S. markets traded higher backed by optimism about trade talks between the U.S. and China. The U.S. government said that it wishes to see additional progress as discussions at the ministerial and vice-ministerial levels continue in Washington. Buying interest found additional support from media reports stating that both the House and Senate passed legislation to avoid another government shutdown. European markets too witnessed buying spree led by optimism regarding U.S.-China trade talks. Market sentiment improved after fresh round of long-term loans from the European Central Bank to euro zone banks is being discussed in the wake of the recent economic slowdown in the region. However, gains were restricted by fresh political uncertainty in Spain. Asia Asian markets rose, reflecting gains in global peers. Optimism about U.S.-China trade talks, strong endeavor by U.S. to avoid another government shutdown and surge in crude oil prices supported market gains. 11
Global Debt (U.S.) US 10-Year Treasury Yield Movement 2.73 2.69 2.65 2.61 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb Source: Thomson Reuters Eikon Yields on the 10-year U.S. Treasuries rose 4 bps to close at 2.67% from the previous close of 2.63%. U.S. Treasury prices fell initially after U.S. lawmakers reached a tentative pact to avert another government shutdown, which reduced the safe haven appeal of U.S. Treasuries. U.S. Treasury prices fell further after U.S. core consumer price inflation rose modestly in Jan 2019 which eased concerns of low inflation. However, most of the losses were neutralized after U.S. retail sales recorded their biggest drop in more than nine years in Dec 2018 which raised concerns of a slowdown in U.S. economic activity at the end of 2018. 12
Global Commodity Prices Commodities Market Rebased to 10 Performance of various commodities Commodities Last Closing* 1-Week Ago Brent Crude($/Barrel) 66.04 61.46 Gold ($/Oz) 1,321.01 1,313.99 Gold (Rs/10 gm) 33,193 33,043 Silver ($/Oz) 15.78 15.82 Silver (Rs/Kg) 39,767 39,880 Source: Thomson Reuters Eikon *Value as on Feb 15, 2019 13 Global Commodity Movement 11.44 7.45% 10.81 0.53% 10.19-0.30% 9.57 15-Jan-19 25-Jan-19 4-Feb-19 15-Feb-19 14-Feb-19 Gold Spot ($/Oz) Silver Spot ($/Oz) Brent ($/bbl) Source: Thomson Reuters Eikon Gold Gold prices gained as investors became anxious over the slowdown in the global economy. Further, investors remained watchful of the progress of U.S.-China trade negotiations as the discussion will resume next week in Washington although both the nations stated that this week s talks in Beijing made progress. Brent Crude Brent crude prices surged tracking OPEC-led production cut of around 800,000 barrels per day in Jan 2019 to squeeze out supply from the oil market and support the commodity s price. In addition, Saudi Arabia announced its plan for deeper cuts. Baltic Dry Index The Baltic Dry Index registered a rise of on the back of improved capesize and panamax activities.
Currency Prices ( in terms of INR) Currencies Markets Rebased to 10 10.30 10.10 9.90 Movement of Rupee vs Other Currencies Currency Last Closing* 1-Wk Ago US Dollar 71.25 71.29 Pound Sterling 91.23 92.29 EURO 80.42 80.83 JPY(per 100 Yen) 64.55 64.98 Source: RBI Figures in INR, *Value as on Feb 15, 2019 14 9.70-0.66% 15-Jan-19 25-Jan-19 4-Feb-19 15-Feb-19 14-Feb-19 Source: RBI Currency Movement USD GBP Euro JPY -0.06% -1.16% -0.51% Rupee The rupee strengthened slightly against the greenback as optimism continued over rate cut by the Monetary Policy Committee on Feb 7. Selling of the greenback by banks further strengthened the rupee. Euro The euro weakened against the greenback on concerns of a slowdown in eurozone s economic growth after industrial production in euro zone fell more than expected in Dec 2018. Pound The pound weakened against the greenback after U.K s economic growth slowed sharply in fourth quarter of 2018 amid Brexit concerns. Yen The yen weakened against the greenback after U.S. lawmakers reached a tentative pact to avert another government shutdown.
15 The Week that was 11 th February to 15 th February
The Week that was (Feb 11 Feb 15) Date Monday, February 11, 2019 Tuesday, February 12, 2019 Wednesday, February 13, 2019 Thursday, February 14, 2019 Friday, February 15, 2019 Events Present Previous Value Value U.K. Gross Domestic Product (YoY) (4Q P) 1.30% 1.60% U.K. Industrial Production (YoY) (Dec) -0.90% -1.30% U.K. Manufacturing Production (YoY) (Dec) -2.10% -1.20% India Consumer Price Inflation (YoY) (Jan) 2.05% 2.11% India Index of Industrial Production (YoY) (Dec) 2.40% 0.30% Japan Tertiary Industry Index (MoM) (DEC) -0.30% -0.30% U.K. Consumer Price Index (YoY) (Jan) 1.80% 2.10% U.S. Consumer Price Index (YoY) (Jan) 1.60% 1.90% Japan Gross Domestic Product Annualized (QoQ) (4Q P) 1.40% -2.50% U.K. House Price Index (YoY) (Dec) 2.50% 2.70% Eurozone Industrial Production (YoY) (Dec) -4.20% -3.00% India Wholesale Price Inflation (YoY) (Jan) 2.76% 3.80% Germany Gross Domestic Product (YoY) (4Q P) 0.60% 1.10% Eurozone Gross Domestic Product (YoY) (4Q P) 1.20% 1.20% U.S. Retail Sales Advance (MoM) (Dec) -1.20% 0.10% Eurozone Employment (YoY) (4Q P) 1.20% 1.30% China Consumer Price Index (YoY) (Jan) 1.70% 1.90% 16
17 The Week Ahead 18 th February to 22 nd February
The Week Ahead Day Monday, February 18, 2019 Tuesday, February 19, 2019 Wednesday, February 20, 2019 Thursday, February 21, 2019 Friday, February 22, 2019 Event U.K. Rightmove House Prices (YoY) (Feb) Eurozone ZEW Survey (Economic Sentiment) (Feb) U.K. Employment Change 3M/3M (Dec) Japan Trade Balance (Jan) U.S. FOMC Meeting Minutes (Jan 30) U.S. MBA Mortgage Applications (Feb 15) Eurozone Consumer Confidence (Feb A) Japan National Consumer Price Index (YoY) (Jan) U.S. Durable Goods Orders (Dec P) Japan All Industry Activity Index (MoM) (Dec) Germany Consumer Price Index (YoY) (Jan F) China New Home Prices (MoM) (Jan) Germany Gross Domestic Product (YoY) (4Q F) Eurozone Consumer Price Index (YoY) (Jan F) 18
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